Feb. 27 (Bloomberg) -- Mongolia annulled mining licenses
held by Entree Gold Inc. on land near Rio Tinto Group’s Oyu
Tolgoi copper and gold project, saying they had been authorized
incorrectly in 2009.

Entree Gold in 2009 upgraded its exploration permits to
mining licenses, the mining ministry said yesterday in a
statement on its website. The award of a mining license can only
be granted by the Mineral Resource Authority, not the mining
ministry, and is therefore invalid, according to the statement.

“The current mining minister has annulled the 2009
resolution and transferred the matter to the Mineral Resource
Authority,” according to the statement. Rio Tinto has a direct
12.85 percent stake in Entree and a 10.7 percent stake is held
by Rio’s Turquoise Hill Resources Ltd. unit, according to data
compiled by Bloomberg.

Rio, the world’s second-largest mining company, controls 66
percent of Oyu Tolgoi LLC and Mongolia’s government the rest.
Mongolia President Tsakhia Elbegdorj this month said it wants
more control of the project -- the largest copper and gold mine
under construction -- and requested Rio transfer all licenses
connected to the mine to the joint venture. Rio is meeting with
Mongolian officials today to discuss the project.

Entree, based in Vancouver, is investigating reports that
its licenses were canceled, Mona Forster, a spokeswoman for
Entree said by telephone yesterday.

Entree Slumps

Entree fell 10 percent to 45 Canadian cents at the close in
Toronto. The shares have tumbled 66 percent in the past 12
months.

Mongolia and Rio signed an agreement in 2009 to develop
jointly the Oyu Tolgoi deposit, which could generate 30 percent
of the nation’s gross domestic product at its peak.

Unless the mining permits held by Entree are transferred to
Rio’s Oyu Tolgoi venture with the government, the country’s
share of the earnings from the copper and gold field will shrink
to 26 percent from 34 percent, the mining ministry said.

Entree Gold’s licenses are for areas that contain 18
percent of Oyu Tolgoi’s total copper and 32.6 percent of its
gold reserves, as well as some silver and molybdenum, the
ministry said.